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16 March 2018

Brexit will set the British energy market free – and ought to cut costs for consumers too

by The Rt Hon Simon Clarke MP

Originally published by Brexit Central.

You will not be surprised to discover that when Jean-Claude Juncker, Angela Merkel and Donald Trump all agree on something, it isn’t a particularly good idea.

At the end of January, the American President announced he would be slapping severe import duties on Chinese solar panels – a carbon copy of a disastrous EU policy. Just as European tariffs on food and clothes drive up the prices of essential goods for consumers, so too tariffs on solar panels are pushing up our energy bills.

As so often, these European levies were designed with German industry in mind; a futile attempt by the Bundestag to both halt Chinese progress in an expanding sector and to dominate the European market.

This petty protectionism has worked predictably well: China was the top generator of solar power in the world last year, and as costs plummet will spend almost £300 billion on a huge amount of cheap renewable energy capacity in the next two years.

Meanwhile in Europe, all the tariffs have succeeded in doing is to push up bills for consumers and businesses, stifle growth in a burgeoning new industry at which Britain excels, and cost us, through our energy bills, an estimated £700 million in totally unnecessary subsidies.

All solar panels and modules imported into the EU from China have to be sold at or above a Minimum Import Price well above world prices; otherwise importers are required to pay a whopping tariff of 64.9 percent. This is one of the highest import tariffs in the extensive arsenal of protectionist EU trade measures.

Donald Trump is now following suit, with a 30% tariff on Chinese imports that is set to cost 23,000 US jobs. Have we learnt nothing from the past 30 years? The remarkable reduction in poverty we’ve seen across India and China is almost all down to the power of open markets. Get the obstacles for people to trade freely with one another out of the way and watch them flourish; strip away these egregious energy tariffs and solar would once again be undercutting fossil fuels to compete with wind as one of the cheapest sources of energy generation in the world.

As a recent report from UCL makes clear, solar and onshore wind are key to securing lower industrial energy prices, a sector that is often hit hard by policy costs. We know that both would deliver electricity well below UK wholesale prices, meaning they would not only be completely subsidy-free, but would lower wholesale costs across the board. As soon as we leave the European Union, the Government should strip away the tariffs and provide a route to market for these cheap technologies, moving towards its stated aim of the cheapest electricity in Europe. By dramatically reducing costs for businesses, this infusion of cheap clean energy would give more sustainable support to energy-intensive sectors like steel and chemicals than any government subsidy could.

Of course, while we will gain the ability to set our own terms of trade, we will not be turning our back on the continent. This will not mark the end of co-operation on energy with the EU, or indeed with the rest of Europe.

The longest interconnecting electricity cable in the world will soon run across the seabed between the UK and Norway, and from 2021 will provide power to 750,000 British homes. Ofgem estimate that through importing cheap, low-carbon electricity and making money exporting excess UK-generated wind power, this agreement alone will save UK households up to £3.5 billion over 25 years. We are set to build many more interconnectors, including another to Norway, and to France, Belgium, Iceland and other countries over the coming years. The unimpeded free trade of electricity across our border will continue to bring down bills for businesses and consumers for decades to come; indeed, National Grid estimate that each additional gigawatt of interconnector capacity pushes down wholesale prices by 1-2%.

Those who would argue against this transition to a more open and connected energy system should be honest that they are making the case for protectionism and higher bills. The same closed logic applies to every essential good, from food to clothing. If we were to cut our electrical cables to the continent in case of total war with France, then we should also be stockpiling brie and berets in case the worst should occur.

Our energy system, like our politics post-Brexit, will be defined by digitisation, decentralisation, and democratisation. The roll out of smart meters will give consumers more choice over their energy use, while small scale generation like solar panels – or storage units like electric vehicles – will allow people to sell their energy back to the grid. Individuals, not big energy firms – and certainly not Brussels – will have control. Let’s strip back the tariffs and let the electrons flow. Power to the people.



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